Question
Silver Bear Golf (SBG) is a manufacturer of top quality golf clubs with a specialty of putters. Currently, each putter they sell brings in $280
Silver Bear Golf (SBG) is a manufacturer of top quality golf clubs with a specialty of putters. Currently, each putter they sell brings in $280 of revenue at a cost of $200. This past year, they sold 900 putters and they expect this number to grow each year by 13.5% until this model becomes obselete after 15 more years. The foreman at the SBG factory recently brought to your attention a new technology that could lower the cost of production. This technology requires an upfront fixed investment of $205,000 and has the capacity to produce all the putters you want to sell per year at a unit cost of $160. There is no increased working capital need due to this new technology, and no value of the machine/technology after 15 years. What is the NPV of investing in the new technology? Ignore taxes and assume a discount rate of 7.0%. (Hint: Think incrementally; the difference between the world without and with this new technology! Also, ignoring taxes will be a big help if you think right. You are strongly encouraged to use a spreadsheet.) (Enter just the number in dollars without the $ sign or a comma and round off decimals.)
plz show work thanks!!
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